Sunday, 12 March 2017

After years
of criticism from Parliament’s Standing Committee on Defence (hereafter “the
Committee”) for defence funding shortfalls, and for surrendering thousands of
crores of unspent money each year, the defence ministry (MoD) has squarely
blamed the ministry of finance (MoF).

A series of
reports tabled by the Committee on Thursday paints a worrying picture of a
government that, year after year, forces the army, navy and air force to make
do with one-third to half less then the money the services requested at the
time the budget was being framed.

As evident
from the chart, the services are first allocated a significantly smaller
capital budget than demanded during the budget framing. Then, at the stage of revised
estimates, that is often slashed further. Finally, by the time the year ends,
the military is often prevented from spending even that lowered allocation.

Services
demand, but do not get

Year

Service

Budget
Estimate

Revised
Estimate

Spent

Demand shortfall

Projected

Allocated

Projected

Allocated

2013-14

Army

25,528

17,884

19,272

14,967

14,433

42%

Navy

33,776

24,149

27,290

20,419

20,359

40%

IAF

64,608

39,209

65,825

37,750

38,615

41%

2014-15

Army

41,936

26,534

23,833

21,934

18,587

55%

Navy

28,253

23,833

22,903

18,507

22,270

20%

IAF

62,408

33,711

38,948

33,711

32,796

48%

2015-16

Army

31,939

27,342

27,845

24,230

20,704

35%

Navy

26,268

25,003

25,152

19,740

19,875

24%

IAF

46,192

33,687

35,781

30,442

31,198

33%

2016-17

Army#

37,960

26,943

34,706

24,027

17,206*

35%**

Navy

30,223

22,000

22,530

19,596

12,614*

35%**

IAF

41,266

29,795

36,513

28,240

23,770*

30%**

#:Rationalized army budget heads,
including expenses on Rashtriya Rifles, National Cadet Corps, etc

*
: Includes expenditure up to
end-December 2016

**:Shortfall compared with “Revised Estimates”,
since expenditure figures are incomplete for the year.

In the best
case in the last four years, the navy in 2014-15 was allocated 80 per cent of
what it demanded for capital expenditure. In the worst case, the army that year
got just 45 per cent --- less than half of what it had demanded.

The figures
in the chart are extrapolated from the Committee’s Report No. 31, entitled
“Capital outlay on defence services, procurement policy and defence planning”.
That is one of eight reports that the Committee released on Thursday.

The MoD is
required to comment on the Committee’s reports, which are based on information
provided by the MoD in writing and in personal depositions by ministry and
service officials.

In its Report
No 24, titled “Action taken by the Government on the Observations/
Recommendations contained in the Nineteenth Report…”, the Committee noted that
the budget allocation of Rs 2,46,727 crore for 2015-16 was reduced by Rs 22,091
crore to Rs 2,24,636 crore. This included a reduction of 8,903 crore in the
revenue budget and Rs 13,188 crore in the capital budget.

On Thursday,
in its “action taken report” the MoD flatly blamed the MoF and pointed out that
the MoD was “bound by budgetary ceilings conveyed by the [MoF]. Though
reference was made to [MoF] for augmentation of ceilings conveyed by them, no
positive response is received in this regard.”

Further,
the MoD agrees with the Standing Committee that there was only a token increase
in the next year’s budget. The allocation for 2016-17, amounting to Rs 2,49,099
crore, was an increase of only Rs 2,372 crore over BE 2015-16 --- just 0.96 per
cent.

It was only
because the RE was slashed by Rs 22,091 crore that the BE 2016-17 appeared to
be an increase of 24,463 crore over RE 2015-16, a 10.89 per cent rise.

The MoD,
“action taken reply” notes: “This Ministry is in agreement with Committee’s
observation that the funds allocated are not adequate to meet the requirement
of Services. This fact has also been brought to the notice of Ministry of
Finance but no positive response is received in this regard.”

This has
been the pattern for several years: when the defence budget is allocated in
February, the government vows additional allocations to make good any
shortfalls. But, when the revised estimates are published, quite the opposite
happens instead: thousands of crores are slashed from the budget estimates.

Sharply
criticizing the “miniscule” annual increase in defence spending, the Standing
Committee noted: “the allocation does not account for the annual inflation and
fall in the value of the Rupee…. [S]uch a MEAGER INCREASE IN THE BUDGET DOES
NOT IN ANY WAY, FULFILL THE BASIC REQUIREMENTS OF THE FORCES, let along the
modernization aspect (sic, capitals in original).”

In its
“action taken reply”, the MoD indicates that it deals with the dire shortfall
of funds by prioritising spending on the most critical requirements, while less
urgent requirements are placed on the backburner.

“There is a
continuous monitoring of the expenditure progress and prioritisation of the
most urgent requirements. This helps to ensure that limited resources are
devoted to the most critical requirements.”

Said the
Standing Committee: “Defence Expenditure as percentage of Central Government
Expenditure has NOSE DIVED from the level of 15.24 percent in 2000-2001 to
12.59 percent in BE 2016-17 thereby giving an impression that the Government is
not paying attention in providing sufficient allocations to the Ministry of
Defence. This is highly ALARMING and needs to be rectified (sic, capitals in
original)”.

The MoD’s
“action taken reply” notes: “It is agreed that in percentage terms there is a
decreasing trend in Defence Expenditure vis-à-vis Central Government
Expenditure. It may, however, be added that every year there has been increase
in Defence Expenditure.”